A statutory is another name of a financial audit. It is essentially an audit of the final statements of a company, i.e. the profit and loss and the balance sheet. The purpose of a statutory audit is to ensure that these accounts of the company represent a fair and accurate picture of the company’s current financial position on the date of the balance sheet.
It is important that we understand the need for a statutory audit to be carried out. In case of a company, the owners of the company are the shareholders. However, they do not run or manage the day to day affairs of the company. This is done by the board of directors and the management of the company.
So the shareholders need assurance that the accounts maintained and published by the company are authentic and genuine. This is why the law requires that an independent auditor to conduct a statutory audit.
The independent auditor has full authority to check the financial records of the company and publish his findings via an auditor’s report. The shareholders and owners of the enterprise can then be assured of the authenticity and reliability of the financial statements.
Other stakeholders like creditors, employees, potential investors etc also benefit from the statutory audit. They too can base their decisions on these accounts, since they are authentic.